Can I make it as a trader?

[belize]

Can I make it as a trader? At the end of last week I really was'nt sure. After being previously successful with a demo account it was a bit of a shock to start losing every trade I placed.

On Friday I decided not to trade and start evaluating what was going on. I think I can say that by trading real money, writing this journal and then rereading it; I have learnt more about myself and my trading in a week, than years of messing about with demo accounts and reading books. Although I have started reading Van K.Tharp's book.
It's pretty clear that:
My original trading method from a week ago is completely unsuited to a £500 pound spread betting account.
That I need to develop concrete rules based system that is low risk.
That I need to have a good idea of the system's expectancy and how many losing trades in a row I can expect. (To prevent me changing the system)

I have got a few ideas, I am going to spend the rest of this week getting a thorough trading plan together.

cheers for all the help and advice so far

 

[meanreversion]

38 steps to becoming a trader
They are as follows:

1. We accumulate information - buying books, going to seminars and researching.
2. We begin to trade with our 'new' knowledge.
3. We consistently 'donate' and then realise we may need more knowledge or information.
4. We accumulate more information.
5. We switch the commodities we are currently following.
6. We go back into the market and trade with our 'updated' knowledge.
7. We get 'beat up' again and begin to lose some of our confidence. Fear starts setting in.
8. We start to listen to 'outside news' and to other traders.
9. We go back into the market and continue to 'donate'.
10. We switch commodities again.
11. We search for more information.
12. We go back into the market and start to see a little progress.
13. We get 'over-confident' and the market humbles us.
14. We start to understand that trading successfully is going to take more time and more knowledge
than we anticipated.
MOST PEOPLE WILL GIVE UP AT THIS POINT, AS THEY REALISE WORK IS INVOLVED.

15. We get serious and start concentrating on learning a 'real' methodology.
16. We trade our methodology with some success, but realise that something is missing.
17. We begin to understand the need for having rules to apply our methodology.
18. We take a sabbatical from trading to develop and research our trading rules.
19. We start trading again, this time with rules and find some success, but over all we still hesitate
when we execute.
20. We add, subtract and modify rules as we see a need to be more proficient with our rules.
21. We feel we are very close to crossing that threshold of successful trading.
22. We start to take responsibility for our trading results as we understand that our success is in us,
not the methodology.
23. We continue to trade and become more proficient with our methodology and our rules.
24. As we trade we still have a tendency to violate our rules and our results are still erratic.
25. We know we are close.
26. We go back and research our rules.
27. We build the confidence in our rules and go back into the market and trade.
28. Our trading results are getting better, but we are still hesitating in executing our rules.
29. We now see the importance of following our rules as we see the results of our trades when we
don't follow the rules.
30. We begin to see that our lack of success is within us (a lack of discipline in following the rules
because of some kind of fear) and we begin to work on knowing ourselves better.
31. We continue to trade and the market teaches us more and more about ourselves.
32. We master our methodology and our trading rules.
33. We begin to consistently make money.
34. We get a little over-confident and the market humbles us.
35. We continue to learn our lessons.
36. We stop thinking and allow our rules to trade for us (trading becomes boring, but successful) and
our trading account
continues to grow as we increase our contract size.
37. We are making more money than we ever dreamed possible.
38. We go on with our lives and accomplish many of the goals we had always dreamed of.

 

[meanreversion]

(apologies if someone printed this earlier, but it's still not less relevant for it)

 

[matrader]

38 steps to becoming a trader
They are as follows:

1. We accumulate information - buying books, going to seminars and researching.
2. We begin to trade with our 'new' knowledge.
3. We consistently 'donate' and then realise we may need more knowledge or information.
4. We accumulate more information.
5. We switch the commodities we are currently following.
6. We go back into the market and trade with our 'updated' knowledge.
7. We get 'beat up' again and begin to lose some of our confidence. Fear starts setting in.
8. We start to listen to 'outside news' and to other traders.
9. We go back into the market and continue to 'donate'.
10. We switch commodities again.
11. We search for more information.
12. We go back into the market and start to see a little progress.
13. We get 'over-confident' and the market humbles us.
14. We start to understand that trading successfully is going to take more time and more knowledge
than we anticipated.
MOST PEOPLE WILL GIVE UP AT THIS POINT, AS THEY REALISE WORK IS INVOLVED.

15. We get serious and start concentrating on learning a 'real' methodology.
16. We trade our methodology with some success, but realise that something is missing.
17. We begin to understand the need for having rules to apply our methodology.
18. We take a sabbatical from trading to develop and research our trading rules.
19. We start trading again, this time with rules and find some success, but over all we still hesitate
when we execute.
20. We add, subtract and modify rules as we see a need to be more proficient with our rules.
21. We feel we are very close to crossing that threshold of successful trading.
22. We start to take responsibility for our trading results as we understand that our success is in us,
not the methodology.
23. We continue to trade and become more proficient with our methodology and our rules.
24. As we trade we still have a tendency to violate our rules and our results are still erratic.
25. We know we are close.
26. We go back and research our rules.
27. We build the confidence in our rules and go back into the market and trade.
28. Our trading results are getting better, but we are still hesitating in executing our rules.
29. We now see the importance of following our rules as we see the results of our trades when we
don't follow the rules.
30. We begin to see that our lack of success is within us (a lack of discipline in following the rules
because of some kind of fear) and we begin to work on knowing ourselves better.
31. We continue to trade and the market teaches us more and more about ourselves.
32. We master our methodology and our trading rules.
33. We begin to consistently make money.
34. We get a little over-confident and the market humbles us.
35. We continue to learn our lessons.
36. We stop thinking and allow our rules to trade for us (trading becomes boring, but successful) and
our trading account
continues to grow as we increase our contract size.
37. We are making more money than we ever dreamed possible.
38. We go on with our lives and accomplish many of the goals we had always dreamed of.

Not seen this before - but it sums it up perfectly.
Thought I was nearly there (34) but got ovr confident recently & violated MY rules etc...now back at 19/20 ish.
Onwards & upwards.

 

[matrader]

Can I make it as a trader? At the end of last week I really was'nt sure. After being previously successful with a demo account it was a bit of a shock to start losing every trade I placed.

On Friday I decided not to trade and start evaluating what was going on. I think I can say that by trading real money, writing this journal and then rereading it; I have learnt more about myself and my trading in a week, than years of messing about with demo accounts and reading books. Although I have started reading Van K.Tharp's book.
It's pretty clear that:
My original trading method from a week ago is completely unsuited to a £500 pound spread betting account.
That I need to develop concrete rules based system that is low risk.
That I need to have a good idea of the system's expectancy and how many losing trades in a row I can expect. (To prevent me changing the system)

I have got a few ideas, I am going to spend the rest of this week getting a thorough trading plan together.

cheers for all the help and advice so far

Good luck!

 

[meanreversion]

My favourite bit is -

MOST PEOPLE WILL GIVE UP AT THIS POINT, AS THEY REALISE WORK IS INVOLVED.

It's the point at which you realise that even though trading SEEMS easy, it does require effort!

 

[matrader]

My favourite bit is -

MOST PEOPLE WILL GIVE UP AT THIS POINT, AS THEY REALISE WORK IS INVOLVED.

It's the point at which you realise that even though trading SEEMS easy, it does require effort!

Very true indeed....& despite the effort required you are only just beginging to find out how much work / experience is really needed.
School of hard knocks is what this job is.

 

[bevok]

Thats a great list meanreversion, did you write it? For me I would add a stage in around 5:
Start averaging down, moving stops and trading from the seat of our pants, double our account and think we have trading mastered - a natural
6) Lose most of account and realise I'm not.

There is a guy posting his account statements on here at the moment who I fear is at 5)

I only moved on from the MOST PEOPLE stage really because my wife encouraged me to, I had decided the markets were a random mess. For me trading with rules for a long period (even if they're not the best in the world, I used Triple Screen) was vital to learn what consistency is. Once you then get a really good plan after that experience, the only way is up.

 

[meanreversion]

No I didn't write that list. I found it ages ago and it struck me as being very accurate.

I only started achieving results when I moved to a mechanical system. Elder (Triple Screen dude) is not a big believer in them, but he is very clear about the need to use rules (slight paradox in there).

I have far too many weaknesses as a discretionary trader, so I don't even attempt it any more.

 

[scose-no-doubt]

That list is from Mastering the Trade by John Carter.

 

[bevok]

I think Elder might have softened towards mechanical systems, he endorsed Richard Weissman's superb book on the subject. I traded triple screen mechanically, it was more of a learning experience really. It is based on sound market principles so you're not going to go too wrong with it, but I have moved on from there to a simple trendfollowing approach.

I must admit I couldn't trade having to pore over charts with three oscillators trying to spot divergence in the making - like most T.A. its only useful in the middle of the chart not the right edge!

 

[bevok]

Are you sure scose-no-doubt? I can't find it . . .

 

[scose-no-doubt]

100%

 

[bevok]

LOL, well I'm pleased you made me pick the book up. When I first bought it I was most interested in the 'high probability' setups. How our outlook changes - years later I'm looking now at the stuff on market psychology, its not too bad!

 

[meanreversion]

I think Elder might have softened towards mechanical systems, he endorsed Richard Weissman's superb book on the subject. I traded triple screen mechanically, it was more of a learning experience really. It is based on sound market principles so you're not going to go too wrong with it, but I have moved on from there to a simple trendfollowing approach.

I must admit I couldn't trade having to pore over charts with three oscillators trying to spot divergence in the making - like most T.A. its only useful in the middle of the chart not the right edge!

Interesting... I've got Weissman's book but it's a little flaky for my liking. He details a great number of mechanical systems, but at the beginning introduces the disclaimer that he doesn't actually use any of them. Hmmmmmmmmm.

Let's be honest - as with any style of trading, the issue is drawdown. It's easy to backtest for a decade and go "yeah, I'll do that" but how you respond in drawdown will make or break the system. I've skipped a couple of signals this year that cost £20k or more, so I try hard not to diverge now. Even then, there are occasions when I miss signals and it might cost money to take the trade.. human emotions always come into play.

 

[bevok]

Anecdotally most of the mechanically based funds fail because of missed trades more than other factors (aside from the 'outside trading' stuff like investors withdrawing, can't attract funds etc). Thats what keeps me going swallowing that bitter pill and putting on that Corn trade AGAIN after the past five Corn trades have lost!

Your opinion is interesting - I thought Weissman's book was great, good arguments for why MBT works, why the different types work etc. I think all he was meaning with the disclaimer is that he has proprietry systems he uses which is fine - I wouldn't expect him to give them away in a book! The ones in there are good basic robust systems, although they're just a starting point, I'm sure you're trading something with a far better P/MD ratio. I must admit I was surprised at how well the mean following systems did. I haven't tested those approaches myself but I didn't think most of those oscillators would produce positive results.